Group scouring India, Korea, China for investments
By Catherine Ong
http://business-times.asia1.com.sg/news/story/0,2276,43437,00.html?
(SINGAPORE) Warburg Pincus, a powerhouse in private equity investments, yesterday closed a whopping US$5.3 billion fund in New York, and plans to invest at least US$1 billion in Asian companies over the next four years.
The move is a further sign that five years after the 1997/98 currency crisis, the region is slowly but surely making a comeback with international direct and portfolio investors. In recent months, investor jitters in Latin America, the Enron scandal in the US and sluggish growth prospects in Europe, have fuelled a surge of liquidity into Asian equities. South Korea, in particular, has stood out as flavour of the month with foreign investors.
Dalip Pathak, managing director of Warburg Pincus Singapore, told BT that with the closure of Warburg Pincus Private Equity VIII, LP (WP VIII), its 10th fund over a 30-year history, the group has US$7 billion at its disposal for global investments. This includes the balance of cash from two earlier funds - a global fund which invests primarily in US companies, and the international fund, which invests outside of America.
Of the US$7 billion, about US$3 billion is slated for non-US investments, of which between US$1 billion-US$1.5 billion could be invested in Asia. 'We are fully funded for the next 3 or 4 years, we are ready for business,' Mr Pathak noted.
The firm is scouring India, Korea and China in particular, for investment prospects, and is keen on deals of at least US$20 million. The three countries have received the lion's share of the US$1.5 billion it has already channelled into the region.
In India, it has already put US$670 million to work, taking stakes in Bharti phone company and mortgage bank, HDFC. Other regional investments included Korea's LG Card and China's system integrator, Asia Info.
Warburg Pincus set up office in Singapore at UOB Plaza in 1999 and has a team of seven professionals and four partners here covering South Asia and South-east Asia. It hasn't invested in any significant way in Singapore because the large deals here are dominated by government entities, and 'they don't need our money', Mr Pathak said.
'I would love to see some of the companies here privatise so we can invest in them. But until that happens, there's nothing we can do about it.'
Warburg Pincus isn't part of the SG Warburg investment banking group as is commonly assumed. It traces its roots to Eric Warburg, whose firm teamed up with Lionel Pincus and John Volgelstein in the 1960s. The latter two were the main drivers in Warburg Pincus but handed over the reins to co-presidents, Joseph Landy and Charles Kaye, two years ago.
Mr Pathak said the fact the firm was able to close a US$5.3 billion fund amid a tough economic environment and effect a 'generational change in management' underscores investors' confidence in its ability to continue to produce sterling returns and maintain a high distribution rate.
WP VIII, which first raised US$2.9 billion last July, is one of the largest funds closed in 2001 and this year, exceeded only by Thomas H Lee Equity Partners V of Boston (US$6.1 billion) and DLJ Merchant Banking Partners III (US$5.4 billion).
But having the muscle to raise large amount of private capital has created a problem of its own in today's depressed economic climate. As The Private Equity Analyst, a US industry newsletter, pointed out in its April issue, there is too much money sitting on the sidelines doing nothing.
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